Yahoo! Inc. (NASDAQ:YHOO)’s stock experienced a strange phenomenon today, one that has now made it a potential high-priority target of top activist investors like Bill Ackman and Carl Icahn. Speaking on CNBC today, investor and author Josh Brown commented on the slide of Yahoo! Inc. (NASDAQ:YHOO)’s stock even as Alibaba Group Holding Ltd (NYSE:BABA)’s roared out of the IPO gates, and what it could mean.
“I think this is bait for an activist. I actually think this is the number one target now for activist shareholders, hedge funds, in America. There is absolutely no way, in my opinion, they’re going to allow this management team, this board of directors, to take $6 billion, do a buyback, and then have another free $6 billion in cash to experiment; it’s not going to happen,” Brown said.
Brown added that he wouldn’t be surprised if one or more of such investors were already working on their positions today and beginning the process of accumulating Yahoo! Inc. (NASDAQ:YHOO) stock. Nor would it be the first time activists have taken an interest in Yahoo! Inc. (NASDAQ:YHOO).
Dan Loeb began taking a huge stake in Yahoo! Inc. (NASDAQ:YHOO) in August 2011 through his Third Point hedge fund when the stock was trading at just $13, amassing his entire position of some 60 million shares at an average of about $13.50 per share, and taking a seat on the company’s board, where he was instrumental in ousting former CEO Scott Thompson and installing current one Marissa Mayer. When he sold a majority of his position two years later and gave up his seat, he had made $1 billion in the deal.
As CNBC analyst Jon Najarian explained, the unusual activity on Yahoo! Inc. (NASDAQ:YHOO)’s stock today was a hedge against Yahoo! Inc. (NASDAQ:YHOO)’s holdings in Alibaba Group Holding Ltd (NYSE:BABA). Yahoo! Inc. (NASDAQ:YHOO) dipped 2.74% to close at $40.93, even as their stake in Alibaba Group Holding Ltd (NYSE:BABA) became vastly more valuable, as the Chinese e-commerce giant shot up 38.07% on its IPO day to close at $93.89.
At their current market cap of $40 billion, Yahoo! Inc. (NASDAQ:YHOO) is now essentially trading at less than zero value, given the slightly more than $40 billion in cash and stock they now hold.
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